Whilst bankruptcy has various financial impacts, it surely does not mean the end of the world. Many individuals file for bankruptcy for a number of reasons, and this amount only increases with the tough economic conditions that we observe today. According to reports from the Australian Financial Security Authority (AFSA), there were 7,466 episodes of bankruptcy in Australia in the September 2014 quarter alone. Finding bankruptcy advice is crucial so you become mindful of exactly what transpires financially when you declare bankruptcy.
There are two kinds of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy means that you are currently in the process of bankruptcy and are unable to secure any kind of loan. Discharged bankruptcy signifies that you are no longer bankrupt, and can secure a loan with numerous specialist lenders. Bankruptcy generally lasts for three years however can be extended in some situations.
Sadly, the banks don’t list the reasons for your bankruptcy and this can make it particularly challenging to get a home loan approved when you are ultimately discharged. Whether you will be capable to purchase a home after bankruptcy relies on various factors, like the type of loan you’re after and how you manage your credit rating once declared bankrupt. What’s clear is that your spending power will be limited, and repossession of property is standard.
Can you get a home loan approved after bankruptcy?
There are a range of specialist lenders granting home loans to clients that have been discharged from bankruptcy for as little as one day. Whilst the majority of these loans come with a higher interest rate and fees, they are nevertheless an option for people that are eager. In most cases, a larger deposit is needed and there are more stringent terms and conditions compared to regular home loans.
There are lots of differences amongst lenders for discharged bankruptcy loan approvals. Some lenders will even provide reduced interest rates to those whose finances are in good condition and who have excellent rental history, if relevant. The length of time between your discharge and loan application will additionally impact the end result of your application. Two years is usually advised. On top of that, sustaining a steady income and employment are also details which will be taken into account. A lot of bankrupt individuals will also make an effort to attempt to increase their credit rating immediately to decrease the strain of bankruptcy once discharged.
Points to consider when applying for a home loan once discharged.
Choosing an appropriate lender is critical, so it’s a good idea to select a lender that not only offers loans to discharged bankrupts but one that is widely known and respectable. By doing this, you will feel comfortable that you are receiving reasonable terms and conditions and your application is more likely to be approved. There are a few questionable lenders on the market that take advantage of the financially vulnerable, so please be careful. Another valuable factor to consider is that you should not apply to more than one lender simultaneously. Every loan application surfaces on your credit history, and numerous applications at the same time are viewed negatively by lenders.
Pros and cons of home loans for discharged bankrupts
You can still a loan. Though it may be tough, it is still attainable for discharged bankrupts to get a home loan approved.
The longer you have been discharged, the easier it gets. Spending time restoring your finances shows the lenders that you are financially responsible.
Your credit rating will improve. Basic tasks such as paying your bills on time and generating steady income will improve your credit rating.
You cannot get a loan until you are discharged. The majority of lenders will not approve any loans to those that are undischarged to avoid jeopardizing any additional financial distress.
Increased rates and fees. Usually, interest rates and fees will be higher for discharged bankruptcy loans. You can only obtain lower interest rates with a bigger deposit.
Record of bankruptcy. You will have a record of bankruptcy on your credit history for seven years after discharge, and your name will always be on the National Personal Insolvency Index (NPII).
Bankruptcy is never a pleasant experience, but it doesn’t imply that you will never own a home again. Because of the complexity of bankruptcy, it’s crucial to seek professional advice from the experts to ensure you understand the process and therefore make sound financial decisions. For more details or to speak to someone about your scenario, contact Bankruptcy Advice Perth on 1300 879 867 or visit https://www.bankruptcy-advice.com.au/perth